Case Information
*0 11/30/2020 UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
GULF INVESTMENT CORP., :
In re: Ex Parte Application of Gulf Investment :
Corp. for an Order to Conduct Discovery for :
Use in Foreign Proceedings Pursuant to 28 : 19-mc-593 (VSB)
U.S.C. 1782 : : OPINION & ORDER
Applicant, : :
:
THE PORT FUND L.P., PORT LINK GP :
LTD., :
:
Intervenors. :
:
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Appearances:
Kristin Tahler
Quinn Emmanuel Urquhart & Sullivan, LLP
Washington, D.C.
Counsel for Applicant
Kathy Hirata Chin
Crowell & Moring LLP
New York, NY
Counsel for Intervenor
VERNON S. BRODERICK, United States District Judge:
Gulf Investment Corporation (“GIC”) brings this application for an Order pursuant to 28 U.S.C. § 1782 authorizing it to obtain discovery from banks and professional service providers
within the Southern District of New York for future use in foreign litigation. (Doc. 1.) Because GIC did not show in its application that the discovery it seeks is “for use” in a foreign proceeding
that is “within reasonable contemplation,” the application is DENIED.
Background [1]
GIC is a Kuwait-based corporation owned by the governments of the six member states of the Gulf Cooperation Council; specifically, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and
the United Arab Emirates. (Tahler Decl. ¶ 1 n.1.) The Port Fund L.P. is an exempted limited
partnership organized under the laws of the Cayman Islands created to make private equity
investments. (GIC Mem. 5.) Port Link GP Ltd., is the general partner in Port Fund L.P.
(together “the Port Fund”). ( Id. 2.) The Port Fund was set up in 2007 as a vehicle for
investments in port-related assets around the world. ( Id. ) GIC is one of the limited partners in
the Port Fund. ( Id. 1.) Specifically, GIC invested a total of USD 20 million into the Port Fund
between 2007 and 2013. ( Id. 5.)
The investment most referenced and relied upon in the application is Clark Global City, a major greenfield airport infrastructure site in the Philippines (the “Clark Asset”). ( Id . 1.) In
November 2017, the Port Fund announced the sale of the Clark Asset. ( Id . 2.) According to
GIC, financial filings in the Philippines indicated that the sale price approached 1 billion dollars
in United States currency, [2] yet the amount reported by the Port Funds was $496 million. ( Id .)
Following the sale, and unbeknownst to GIC, the sale proceeds were transferred to an account at
Noor Bank in Dubai held in the name of Port Link. ( Id .) Upon arrival in Dubai, the money was
frozen by the UAE Central Bank. ( Id .) The monies remained frozen in Dubai until February
2019, when some of it was unfrozen and eventually distributed to the Port Fund’s limited
partners. ( Id .) However, as of the filing of the application, only $305 million (or approximately
61% of the total amount) had been distributed to the Port Fund’s limited partners, of which GIC
received $25.4 million. (Tahler Decl. ¶ 12.)
GIC filed its application seeking discovery to “support contemplated litigation by GIC in the Cayman Islands (‘Contemplated Cayman Litigation’) pursuing [] answers” to two main
questions “and, ultimately, its now-missing money.” (GIC Mem. 1.) First, the basis for the
discrepancy between the sales price of the Clark Asset as reported in the Philippines and the Port
Fund’s reported exit amount, and second, the basis for the discrepancy between the reported exit
amount and the amount distributed to the limited partners. ( Id. 3.) The other alleged misconduct
includes: (1) litigation in Dubai instituted by the Fund Manager against the Port Fund and Port
Link which resulted in an uncontested award of $57 million to the Fund Manager; (2) the
potential misappropriation of Port Fund assets to pay lobbying and public relations firms; (3)
unexplained, favorable treatment of a party related to KGL Investment Company KSCC
(“KGLI”), the sponsor of the Port Fund, and the placement agent and administrator for the Port
Fund, under a loan agreement related to the Port Fund’s investment in Damietta International
Ports Company (“DIPCO”); and (4) the Port Fund’s engagement of an alleged interested and/or
conflicted financial advisor, Apache Asia Limited (“Apache Asia”), purportedly to assist with
transactions relating to at least two of its investments. ( Id. ) GIC brings the application seeking
permission to subpoena documents and information for use in contemplated litigation in the
Cayman Islands from twelve non-party banks located in the Southern District of New York
(“Correspondent Banks”). GIC seeks this discovery because it “has been unable to fully
investigate or substantiate the misconduct involving the Port Fund.” ( Id . 12.)
GIC also seeks from the Correspondent Banks documents and information relating to, among other things,: (1) the Port Fund’s investment in the Clark Asset; (2) the Port Fund’s
investment in shipping company Negros Navigation; (3) the Port Fund’s investment in DIPCO;
(4) transactions between the Port Fund, Port Link, KGLI, and the Fund Manager and certain
companies that advised the Port Fund (“Advisors”); (5) transactions between the Port Fund
Companies and lobbying firms that worked on behalf of the Port Fund (“Lobbying Firms”); (6)
transactions between the Port Fund Companies and public relations companies that may have
worked on behalf of the Port Fund (“Public Relations Companies”); (7) transactions between the
Port Fund Companies and entities controlled by KGLI’s former parent Kuwait and Gulf Link
Transport Company K.S.C.P. (“KGL”) (“Related Companies”); and (8) transactions between the
Port Fund Companies and certain companies outside of the Related Companies that have
suspicious/hidden ownership structures (“Anomalous Companies”) (collectively, “Requested
Discovery”). ( Id . 4, 5.) According to GIC, its investigation to date indicates that the
Correspondent Banks would have processed such transactions. ( Id .)
Procedural History GIC filed its § 1782 application on December 26, 2019, with a memorandum of law in support and declarations from Kristin Tahler, Anna Peccarino, and Nicholas Bortman, each
declaration with one or more exhibits. (Docs. 1, 4, 5, 6, 7.) On January 6, 2020 the Port Fund
filed a letter request to intervene and objecting to the application. (Doc. 8.) On January 9, 2020,
GIC filed a letter opposing the Port Fund’s letter request to intervene. (Doc. 10.) On January 30,
2020, the Port Fund filed a letter in further support of its request to intervene, and GIC followed
a response on February 3, 2020. (Docs. 17, 18.)
On March 6, 2020, I issued an Order directing the parties to meet and confer on a briefing schedule jointly briefing the motion to intervene and the opposition to the 1782 application.
(Doc. 19.) On April 20, 2020, I adopted the proposed briefing schedule. (Doc. 22.)
On May 15, 2020, the Port Fund filed its motion to intervene and in opposition to GIC’s § 1782 application, (Doc. 23), a memorandum of law, (Doc. 24), declarations of Barnaby Gowrie
with exhibits, (Doc. 25, 28), and declaration of Kathy Chin with exhibits, (Doc. 26). On June 12,
2020, GIC filed its opposition to the Port Fund’s motion to intervene and reply in further support
of its application. (Doc. 31.) On June 26, 2020, the Port Fund filed a reply memorandum of law
in further support of its motion to intervene and in opposition to the application with
supplemental declarations of Kristin Tahler with exhibits, and Anna Peccarino. (Doc. 36.) Oral
argument was held on August 14, 2020. At oral argument I granted the Port Fund’s motion to
intervene. ( See generally Transcript of Proceedings (“Tr.”) at 3-10, Doc. 40.) After oral
arguments the parties filed a joint status update, and numerous subsequent letters in further
response to my questions at oral argument and with further status updates. (Docs. 42, 43, 44, 45,
46, 47.)
Legal Standard
When reviewing an application for discovery related to a foreign proceeding under 28 U.S.C. §1782, I must first determine whether I have the authority to grant the request. I am
authorized to grant a § 1782 request if: “(1) the person from whom discovery is sought resides
(or is found) in the district of the district court to which the application is made, (2) the discovery
is for use in a foreign proceeding before a foreign [or international] tribunal, and (3) the
application is made by a foreign or international tribunal or any interested person.” Mees v.
Buiter
,
AG
,
met I cannot grant the § 1782 application.
See In re del Valle Ruiz,
2019);
Kiobel by Samkalden v. Cravath, Swaine, & Moore LLP
,
2018).
“[O]nce the statutory requirements are met, a district court is free to grant discovery in its discretion.” In re Application for an Order Permitting Metallgesellschaft AG To Take
Discovery
,
grant the discovery request, I must consider the four so-called Intel factors: (1) whether the
person from whom discovery is sought is not a participant in the foreign proceeding and is
therefore outside the foreign tribunal’s jurisdictional reach; (2) the nature of the foreign tribunal
and its receptivity to judicial assistance by United States federal courts; (3) whether the request
conceals an attempt to circumvent foreign evidence-gathering rules; and (4) whether the request
is unduly intrusive or burdensome.
Intel Corp. v. Advanced Micro Devices, Inc.
,
264-65 (2004).
Applicant need not “affirmatively show” that the foreign courts are receptive to United States federal judicial assistance; rather, the burden is on the opponent of a § 1782 request to
prove that the foreign court would reject the evidence obtained through § 1782. In re
Application of OOO Promnefstroy for an Order To Conduct Discovery for Use in a Foreign
Proceeding
, No. 19-mc-99,
Microsoft Corp.
,
express objection to conclude that it was not receptive to the assistance of the U.S. federal
courts).
I may also weigh the probative value of the requested materials in considering whether the requests are unduly burdensome. See In re Application Pursuant to 28 U.S.C. Section 1782
of Okean B.V. & Logistic Solution Int’l To Take Discovery of Chadbourne & Parke LLP , 60 F.
Supp. 3d 419, 428, 432 (S.D.N.Y. 2014); see also Schmitz v. Bernstein Liebhard & Lifshitz,
LLP.
,
orders where possible,” in lieu of the outright rejection of applications under § 1782). An
application must seek a “specific, discrete set of documents that are easily identifiable.” In re
Berlamont
, No. 14-mc-00190,
Discussion I first address the statutory requirements. Here, the first and third statutory requirements are not in dispute. ( See Port Fund Mem. 13.) [3] Therefore, the only statutory requirement in
dispute is whether or not the requested materials are for use in a foreign proceeding.
To satisfy the “for use in a foreign proceeding” requirement, the proceeding before a foreign or international tribunal need not be ongoing or imminent, rather litigation must merely
be within “reasonable contemplation.”
Intel
,
desire that broad discovery be available for parties involved in international litigation while also
guarding against the potential that parties may use § 1782 to investigate whether litigation is
possible in the first place, putting the cart before the horse.” In Re Certain Funds, Accounts
and/or Investment Vehicles v. KPMG, L.L.P.
, No. 14 Civ. 1801(NRB),
(S.D.N.Y July 9, 2014). Therefore, courts should “be wary of fishing expeditions in which §
1782 applicants seek new tidbits they can use as the basis to bring litigation, rather than support
the claims they have already made.” Deposit Ins. Agency v. Leontiev , No. 17MC00414GBDSN,
Inv. Vehicles Managed by Affiliates of Fortress Inv. Grp. LLC , No. 14-CV-1801 (NRB), 2014
WL 3404955, at *6 (S.D.N.Y. July 9, 2014), aff’d sub nom. Certain Funds, Accounts &/or Inv.
Vehicles v. KPMG, L.L.P.
,
“discussing the possibility of initiating litigation” is insufficient to show that a proceeding is
within reasonable contemplation. Certain Funds, Accounts and/or Investment Vehicles v.
KPMG, L.L.P.
,
indicium that the action is being contemplated” that goes beyond a subjective “twinkle in
counsel’s eye.” Id. at 123–24. “[S]worn statements attesting to petitioners’ intent to litigate and
describing the legal theories on which they plan to rely are sufficiently concrete to meet the
statutory requirement.”
In re Top Matrix Holdings Ltd.
,
2020) (citing
In re Hornbeam Corp.
,
GIC fails to demonstrate in its application that the evidence it seeks is “for use” in foreign litigation as the litigation is not “within reasonable contemplation.” In the initial Declaration of
Anna Peccarino, an attorney with the Cayman Islands office of Travers Thorp Alberga,
Attorneys-at-Law (“TTA”) counsel for GIC in the Cayman Islands, she states that “the
Requested Discovery is being sought to support potential claims that GIC is considering
pursuing in the Cayman Islands in relation to the Port Fund.” (Peccarino Decl. [4] ¶ 6.) Ms.
Peccarino further states that her law firm has “been evaluating” claims against the Port Funds in
a number of areas. (Peccarino Decl. ¶ 7.) In its memorandum submitted in support of its
application, GIC admits that it seeks discovery because it “has been unable to fully investigate or
substantiate the misconduct involving the Port Fund.” (GIC Mem. 12.) These statements
suggest GIC intends to use the discovery to gather evidence to initiate a proceeding. An
assertion that the applicant “plans to use the evidence [it] seeks to assess whether to initiate
actions . . . underscores the ‘mere[ ] speculative[ness]’ of the contemplated proceedings, and is
plainly insufficient to provide th[e] Court with ‘some concrete basis from which it can determine
that the contemplated proceeding is more than just a twinkle in counsel’s eye.’” In re Sargeant ,
278 F. Supp 3d 814, 823 (S.D.N.Y. 2017) (quoting
KPMG
,
GIC argues that its private investigations into the Port Fund is sufficient to show that the contemplated proceeding is more than a twinkle in counsel’s eye, (Tr. 15); however, this
argument is unpersuasive. Although these investigations may have aided GIC in its
consideration of legal action, GIC did not provide any detail as to the potential form of litigation
it intended to pursue, nor does it provide legal theories under which it intended rely in such
litigation. Specifically, Ms. Peccarino, an attorney at TTA retained to “evaluate potential
claims”, fails to provide a description of the form of litigation GIC intends to pursue, nor does
she describe the potential claims and/or legal theories GIC would include or employ in such a
contemplated litigation. Although stating a legal theory is not a requirement of § 1782, it is one
factor I can consider.
See In re Top Matrix Holdings Ltd.
,
Mangouras v. Squire Patton Boggs
, Nos. 17-3633, 19-100, 19-186,
Cir. Nov. 9, 2020) (holding that the district court erred in finding a foreign proceeding
reasonably contemplated where petitioner’s “submissions did not provide the legal theory
supporting such a proceeding, nor did he clearly lay out . . . the content of his claims”). The
cases GIC cites in support of its motion all include an articulation of a legal theory upon which
they intend to initiate proceedings.
See In re Hornbeam Corp.
,
that a foreign proceeding was reasonably contemplated where the applicant “represented that it
intended to initiate further litigation,” and “articulated a theory on which it intended to litigate”);
In re Kiobel
, No. 16 Civ. 7992,
had already drafted a “writ of summons” articulating specific claims against the target company),
rev’d,
(holding that for use requirement was been met where petitioners swore that they intended to file
a criminal complaint in Luxembourg Criminal Court and articulated a specific legal theory on
which they intended to rely);
In re IJK Palm LLC
, No. 3:16MC171(RNC),
*4 (D. Conn. Jan. 30, 2019) (stating specific legal theories of breach of fiduciary duty,
negligence, and fraud). GIC lists the alleged wrongdoings that it has investigated and intends to
address by purportedly initiating legal action, but fails to articulate legal theories upon which it
intends to proceed to right these purported wrongs. ( See GIC Mem. 13.)
In its reply brief, GIC states for the first time that the contemplated litigation is a “just and equitable winding up petition in the Cayman Islands against the PFEs [(Port Fund Entities)]
(“J&E Petition”).” (GIC Reply, 7.) [5] However, courts in this Circuit “assess the indicia of
whether the contemplated proceedings were within reasonable contemplation at the time the §
1782 application was filed.” Certain Funds, Accounts and/or Investment Vehicles v. KPMG,
L.L.P.
,
proceeding in its application, and because the application contained no details concerning the
legal theories under which GIC intended to bring suit, GIC has not shown that the foreign
proceeding is within reasonable contemplation. As justification for why it failed to describe the
nature of the proceeding GIC intended to bring in its application, GIC argued in its reply brief
and at oral argument that it did not specify the details of the contemplated litigation because it
“was a matter of litigation strategy,” (GIC Reply at 10; Tr. 17), and because of the distrust
between the parties, (Tr. 17). I find this explanation wanting in light of the relevant case law,
and alternatives available to GIC. As an initial matter, I note that GIC filed its application ex
parte, so the Port Fund was not served the motion and supporting papers at the time they were
filed. Moreover, assuming that GIC was still concerned about the Port Fund’s reaction if they
were able to access the motion and supporting papers despite it being filed ex parte, GIC does
not explain why it did or could not have filed its motion and supporting documents under seal, or
with redactions of, among other things, attorney work product privilege, in order to avoid tipping
its hand.
GIC retained counsel in the Cayman Islands which is representing GIC in another discovery related proceeding in the Cayman Islands (the “Section 22 proceeding”) in which a
consent order was recently entered into, (Port Fund Nov. 11, 2020 Ltr. Ex. A.) [6] , and not
specifically with regard to the potential J&E Petition. The “Matter Description” in the retainer
agreement states “[a]ny advice and assistance that may be required in connection with a potential
information request in relation to Port Link (GP) Limited and/or The Port Fund and any related
advice or assistance that may be required for any further action, including a potential just and
equitable winding up application.” (Retainer Agreement, submitted in camera .) This broad
description does not concretely indicate that Cayman Islands counsel was hired with the specific
purpose of filing the J&E petition. Rather, the scope of the Retainer Agreement is very broad,
and includes “any advice and assistance” relating to a “potential” information request, and
“potential” J&E proceeding. Id. No other counsel has been retained in connection with the
potential J&E Petition. (Tr. 14.)
Because GIC failed to meet the second statutory requirement of § 1782, I need not address the four discretionary factors articulated in Intel . In Re Certain Funds Accounts and/or
Investment Vehicles v. KPMG
,
Conclusion
Because GIC did not demonstrate in its application that the discovery it seeks is “for use” in a foreign proceeding that is “within reasonable contemplation,” GIC’s application for an Order
pursuant to 28 U.S.C. § 1782 authorizing it to obtain discovery from banks and professional
service providers within the Southern District of New York for future use in foreign litigation is
DENIED.
The Clerk of Court is respectfully directed to close the motions at Documents 1 and 23, and close the case.
The Clerk of Court is respectfully directed to make the unredacted Opinion & Order viewable to attorney Kristin Tahler at Quinn Emanuel Urquhart & Sullivan.
SO ORDERED.
Dated: November 30, 2020
New York, New York
______________________ Vernon S. Broderick United States District Judge
Notes
[1] The background is taken from the memorandum of law submitted by GIC in support if it’s § 1782 application, (“GIC Mem.”, Doc. 3), the Declaration of Kristin N. Tahler in support of the application, (“Tahler Decl.”, Doc. 5), and the Declaration of Anna Peccarino in support of the application, (“Peccarino Decl.”, Doc. 6). The information relayed in this section is not meant to be factual findings, and I make no such findings.
[2] Unless otherwise indicated all amounts referenced in the Opinion & Order are in United States dollars.
[3] “Port Fund Mem.” refers to the Memorandum of Law in Support of the Port Fund Entities’ Motion to Intervene and Opposition to GIC Application Pursuant to 28 U.S.C. §1782. (Doc. 24.)
[4] “Peccarino Decl.” refers to the Declaration of Anna Peccarino filed in support of GIC’s application. (Doc. 6.)
[5] “GIC Reply” refers to the Gulf Investment Corporation’s Memorandum of Law in Response to the Port Fund Entities’ Motion to Intervene and in Further Support of its Ex Parte Application for an Order to Conduct Discovery for use in Foreign Proceedings Pursuant to 28 U.S.C. § 1782. (Doc. 31.)
[6] “Port Fund Nov. 11, 2020 Ltr.” refers to the letter filed by the Port Fund Entities on November 11, 2020. (Doc. 48).